The cost of cuts: Arizona tax carve-outs last year hit $13.7B

By Jim Small and Evan Wyloge | Arizona Center for Investigative Reporting

PHOENIX – Teachers who marched on the Capitol this past week in support of doubling the salary boost that lawmakers were considering went home empty handed, as Republican lawmakers backed a budget proposal that grants them a two-percent increase over the next two years, saying there simply wasn’t money available.

The cost of doing so would have been an additional $34 million per year in the first year and $68 million in the second, a tiny fraction of the $9.8 billion spending plan approved May 5.

But that figure is dwarfed by how much tax revenue the state doesn’t collect each year: In fiscal year 2016, state law allowed $13.7 billion in taxes to go uncollected through a litany of exemptions, deductions, allowances, exclusions or credits. And that number is likely to grow by another $1-to-2 billion once individual income tax deductions are tallied.

According to data compiled by the Arizona Department of Revenue, more than half of all state taxes haven’t been collected for at least the past ten years. Called “tax expenditures,” they amount to $136.5 billion since fiscal year 2007 – roughly equivalent to sum of state budgets spanning the past 15 years.

2007 – 2016 tax expenditures by type

TAX TYPEVALUE OF FY16 EXPENDITURESVALUE OF FY15 EXPENDITURESVALUE OF FY14 EXPENDITURESVALUE OF FY13 EXPENDITURESVALUE OF FY12 EXPENDITURESVALUE OF FY11 EXPENDITURESVALUE OF FY10 EXPENDITURESVALUE OF FY09 EXPENDITURESVALUE OF FY08 EXPENDITURESVALUE OF FY07 EXPENDITURES
AIRCRAFT LICENSE TAX EXPENDITURES$5,032,946 $4,985,055 $5,237,479 $5,509,385 $3,095,615 $2,084,593 $2,479,951 $1,523,378 $854,854 $921,600
AVIATION FUEL TAX EXPENDITURES$162,479 $149,151 $200,361 $63,474 $88,549 $92,922 $64,269 $63,999 $40,198 $11,291
BINGO TAX EXPENDITURES$73,028 $70,960 $72,180 RANGE: $9,894 - 122,848RANGE: $10,066 - $122,224$115,562 $112,500 RANGE: $11,350 - $115,756RANGE: $16,250 - $100,300RANGE: $14,000 - $117,000
BOXING & MIXED MARTIAL ARTS TAX EXPENDITURES$3,510 $3,330 $2,393 $780$1,020 $1,350 $1,425 $2,092 $2,000 $3,000
CORPORATE INCOME TAX EXPENDITURES$133,477,546 $132,899,546 $460,328,800 $114,379,124 RANGE: $310,788,000 - $354,588,000$314,863,700 $187,617,700 $237,019,914 $285,615,371 $89,531,000
FIDUCIARY INCOME TAX EXPENDITURES$53,703,660 $32,067,130 $25,482,180 $16,238,279 $15,755,607 $16,118,150 $26,942,943 $29,646,534 $20,940,976 $35,143,579
FLIGHT PROPERTY TAX EXPENDITURES$2,536,654 $939,316 $1,160,836 $900,812 $1,516,123 $1,953,607 $2,001,723 $2,436,567 $3,953,457 $6,619,415
INDIVIDUAL INCOME TAX EXPENDITURES$375,651,568 $310,643,144 $2,233,441,000 $255,280,000 $244,660,000 $1,987,662,000 $2,219,662,000 $1,957,121,000 $2,166,308,000 $1,935,253,000
INSURANCE PREMIUM TAX EXPENDITURES$241,218,934 $242,399,848 $192,143,864 $205,251,402 $199,799,610 $187,803,012 $129,100,469 $194,628,617 $176,187,264 $159,951,660
JET FUEL EXCISE AND USE TAX EXPENDITURES$6,164,499 $6,635,958 $5,131,667 $6,213,031 $6,524,014 $7,895,136 $7,597,099 $6,782,105 $8,161,586 $8,278,846
LUXURY TAX EXPENDITURES$14,597,098 $38,433,557 $23,095,734 $440,305,626 $439,559,322 $19,316,561 $13,699,267 $452,778,717 $471,489,841 $479,588,433
MOTOR CARRIER FEE EXPENDITURES$157,993,764 $153,633,293 $146,508,936 $143,829,818 $143,357,849 N/AN/AN/AN/AN/A
MOTOR VEHICLE FUEL TAX EXPENDITURES$12,446,181 $10,974,015 $9,159,048 $9,250,359 $8,971,864 $7,427,328 $6,872,750 $6,231,754 $7,714,558 $6,501,703
PARI-MUTUEL TAX EXPENDITURES$3,775,986 $4,016,340 $4,032,441 $4,126,235 $4,362,684 $4,372,304 $5,103,187 $6,161,565 $8,398,010 $9,166,397
PRIVATE CAR PROPERTY TAX EXPENDITURES$384,354 $312,407 $425,322 $408,268 $354,940 $301,413 $320,420 $215,426 $154,066 $195,483
PROPERTY TAX EXPENDITURES$403,693,834 $377,979,585 $359,909,184 $328,874,395 $322,669,313 $338,142,925 $388,598,989 $423,642,708 $403,635,384 $366,134,820
SEVERANCE TAX EXPENDITURES$15,196,006 $24,862,000 $26,190,000 $29,829,000 $40,580,000 $40,236,000 $29,100,000 $18,210,000 $43,750,000 $43,550,000
TRANSACTION PRIVILEGE AND USE TAX EXPENDITURES$12,262,397,152 $12,212,283,076 $12,611,204,000 $12,107,810,000 $11,540,920,000 $10,034,020,000 $11,282,560,000 $9,509,380,000 $10,095,961,000 $9,139,532,000
USE FUEL TAX EXPENDITURES$45,731,318 $43,621,085 $45,526,448 $44,186,840 $47,752,045 $42,195,849 $40,513,612 $52,167,262 $18,513,943 $29,414,001
WORKERS‰Ûª COMPENSATION PREMIUM LIEU TAX EXPENDITURES$1,251,000 $1,809,939 $4,995,967 $2,180,526 $2,512,473 $12,738,142 $16,588,835 $6,800,000 $2,976,526 $2,507,346
TOTAL$13,735,491,517 $13,598,718,735 $16,154,247,840 $13,714,637,354 $13,022,481,028 $13,017,340,554 $14,358,937,139 $12,904,811,638 $13,714,657,034 $12,312,303,574

The bulk of the tax expenditures come from a variety of carve-outs to the transaction privilege tax, Arizona’s version of a sales tax. In fiscal year 2016, nearly $12.3 billion was excluded from TPT collections, about half of which was due to services being exempted. Since fiscal year 2007, that figure is $110 billion. During that time, the state actually collected only $50 billion in TPT.

Tax carve-outs on individual income taxes, corporate income taxes and property taxes account for almost all of the rest of the tax expenditures.

Because of an amendment to the state constitution passed by Arizona voters in 1992, any change to the tax code that would result in an increase in revenue, such as removing a carve-out or reducing the expenditure it creates, would require approval by a two-thirds supermajority in each legislative chamber instead of a simple majority.

Sen. Steve Farley, a Tucson Democrat, and Sen. David Farnsworth, a Mesa Republican, introduced Senate Bill 1144 this year, which seeks to require a review of the hundreds of carve-outs, specifically to TPT, every ten years.

“One company buys a high-priced corporate lobbyist to come down, one time, in front of one committee, pass one bill, and they get a tax break into perpetuity,” Farley said of his proposal.

Farley offered recent examples, such as a law passed and signed by Gov. Doug Ducey in 2016, which exempts art gallery sales to out-of-state purchasers. The law is expected to cost $1.3 million each year in tax revenue. Another, which passed but was vetoed by Ducey this year, would have lessened sales tax for private airplane purchases. The bill was sponsored by Rep. Jill Norgaard, a Phoenix Republican, at the behest of Netjets Inc., which sells partial ownership of private jets. Legislative staff were unable to provide a concrete estimate for the cost of the proposed carve-out, but estimated that each plane it applied to would cost the state’s general fund between $470,000 and $2.2 million.

“So, we want to give special breaks to private jet owners and out-of-state art connoisseurs?” Farley asked.

In 2011 and 2012, lawmakers passed a major tax-cut plan that reduced several different corporate and capital gains taxes, phased in over several years. Advocates touted the reforms as needed to drive economic growth and create new jobs. However, legislative budget analysts say that, in the first three years, it the state has foregone $235.8 million in revenue because of those tax cuts.

2015/2016 TPT expenditures by deduction

CATEGORYSUBCATEGORYDEDUCTIONAMOUNT
PREFERENTIAL TAX RATENANonmetalliferous Mining; Oil and Gas Production$2,905,250
PREFERENTIAL TAX RATENACommercial lease$436,677,986
CREDITNAAccounting credit$17,415,320
TPT EXEMPTIONPROFESSIONAL, SCIENTIFIC AND TECHNICAL SERVICESLegal$180,451,406
TPT EXEMPTIONPROFESSIONAL, SCIENTIFIC AND TECHNICAL SERVICESAccounting, Tax Preparation, Bookkeeping and Payroll Services$79,999,327
TPT EXEMPTIONPROFESSIONAL, SCIENTIFIC AND TECHNICAL SERVICESArchitectural and Engineering$200,677,254
TPT EXEMPTIONPROFESSIONAL, SCIENTIFIC AND TECHNICAL SERVICESSpecialized Design Services$12,560,292
TPT EXEMPTIONPROFESSIONAL, SCIENTIFIC AND TECHNICAL SERVICESComputer System Design and Related Services$277,600,097
TPT EXEMPTIONPROFESSIONAL, SCIENTIFIC AND TECHNICAL SERVICESManagement Consulting Services$104,450,931
TPT EXEMPTIONPROFESSIONAL, SCIENTIFIC AND TECHNICAL SERVICESEnvironmental Consulting Services$9,465,021
TPT EXEMPTIONPROFESSIONAL, SCIENTIFIC AND TECHNICAL SERVICESOther Scientific and Technical Consulting Services$16,947,439
TPT EXEMPTIONPROFESSIONAL, SCIENTIFIC AND TECHNICAL SERVICESScientific Research and Development$45,733,381
TPT EXEMPTIONPROFESSIONAL, SCIENTIFIC AND TECHNICAL SERVICESAdvertising, Public Relations and Technical Services$40,247,509
TPT EXEMPTIONPROFESSIONAL, SCIENTIFIC AND TECHNICAL SERVICESOther Professional, Scientific and Technical Services$69,120,875
TPT EXEMPTIONHEALTH CARE SERVICESPhysicians$437,876,426
TPT EXEMPTIONHEALTH CARE SERVICESDentists$117,608,884
TPT EXEMPTIONHEALTH CARE SERVICESChiropractors$13,175,017
TPT EXEMPTIONHEALTH CARE SERVICESOptometrists$10,935,950
TPT EXEMPTIONHEALTH CARE SERVICESMental Health Practitioners$6,697,140
TPT EXEMPTIONHEALTH CARE SERVICESPhysical, Occupational and Speech Therapists$23,211,029
TPT EXEMPTIONHEALTH CARE SERVICESAll Other Health Practitioners$14,368,579
TPT EXEMPTIONHEALTH CARE SERVICESOutpatient Care Centers$117,911,042
TPT EXEMPTIONHEALTH CARE SERVICESMedical and Diagnostic Labs$56,374,511
TPT EXEMPTIONHEALTH CARE SERVICESHome Health Services$52,450,770
TPT EXEMPTIONHEALTH CARE SERVICESOther Ambulatory Health Services$91,293,427
TPT EXEMPTIONHEALTH CARE SERVICESGeneral Medical and Surgical Hospitals$781,357,713
TPT EXEMPTIONHEALTH CARE SERVICESNursing Care Facilities$60,644,906
TPT EXEMPTIONHEALTH CARE SERVICESResidential Intellectual and Developmental Disability, Mental Health, and Substance Abuse Facilities$32,705,894
TPT EXEMPTIONHEALTH CARE SERVICESContinuing Care Retirement Facilities and Assisted Living Facilities$55,604,624
TPT EXEMPTIONHEALTH CARE SERVICESOther Residential Care Facilities$6,365,668
TPT EXEMPTIONHEALTH CARE SERVICESIndividual and Family Services$72,397,566
TPT EXEMPTIONHEALTH CARE SERVICESCommunity Food and Housing, and Emergency and Other Relief Services$32,397,252
TPT EXEMPTIONHEALTH CARE SERVICESChild Day Care Services$21,329,976
TPT EXEMPTIONADMINISTRATIVE AND BUSINESS SUPPORT SERVICESOffice Administrative$46,001,170
TPT EXEMPTIONADMINISTRATIVE AND BUSINESS SUPPORT SERVICESFacilities Support$32,619,024
TPT EXEMPTIONADMINISTRATIVE AND BUSINESS SUPPORT SERVICESEmployment Services$220,912,196
TPT EXEMPTIONADMINISTRATIVE AND BUSINESS SUPPORT SERVICESBusiness Support$82,185,384
TPT EXEMPTIONADMINISTRATIVE AND BUSINESS SUPPORT SERVICESTravel Arrangement and Reservation$68,487,597
TPT EXEMPTIONADMINISTRATIVE AND BUSINESS SUPPORT SERVICESInvestigation and Security$52,786,908
TPT EXEMPTIONADMINISTRATIVE AND BUSINESS SUPPORT SERVICESServices to Building and Dwellings$121,619,413
TPT EXEMPTIONADMINISTRATIVE AND BUSINESS SUPPORT SERVICESOther Support Services$33,270,226
TPT EXEMPTIONADMINISTRATIVE AND BUSINESS SUPPORT SERVICESWaste Collection$38,181,775
TPT EXEMPTIONADMINISTRATIVE AND BUSINESS SUPPORT SERVICESWaste Treatment and Disposal$9,203,513
TPT EXEMPTIONADMINISTRATIVE AND BUSINESS SUPPORT SERVICESRemediation and other waste management services$14,999,390
TPT EXEMPTIONPERSONAL CARE SERVICESBarber$542,508
TPT EXEMPTIONPERSONAL CARE SERVICESBeauty Salons$18,170,698
TPT EXEMPTIONPERSONAL CARE SERVICESNail Salons$3,108,179
TPT EXEMPTIONPERSONAL CARE SERVICESDiet and Weight Reducing Centers$2,281,910
TPT EXEMPTIONPERSONAL CARE SERVICESOther Personal Care$5,252,930
TPT EXEMPTIONPERSONAL CARE SERVICESDeath Care Services$9,034,212
TPT EXEMPTIONPERSONAL CARE SERVICESPersonal and Laundry Services$22,401,602
TPT EXEMPTIONPERSONAL CARE SERVICESPet Care (not Veterinary)$3,404,201
TPT EXEMPTIONPERSONAL CARE SERVICESPhotofinishing$823,339
TPT EXEMPTIONPERSONAL CARE SERVICESParking lot/Garages$10,720,769
TPT EXEMPTIONPERSONAL CARE SERVICESOther Personal Services$3,930,433
TPT EXEMPTIONEDUCATIONAL SERVICESBusiness School/Computer/Management Training$9,422,902
TPT EXEMPTIONEDUCATIONAL SERVICESTechnical and Trade Schools$31,925,365
TPT EXEMPTIONEDUCATIONAL SERVICESOther Schools and Instruction$14,823,135
TPT EXEMPTIONEDUCATIONAL SERVICESEducation Support Services$9,492,997
TPT EXEMPTIONFINANCIAL SERVICESCredit Unions$41,655,186
TPT EXEMPTIONFINANCIAL SERVICESSales Financing$90,469,588
TPT EXEMPTIONFINANCIAL SERVICESMortgage and Nonmortgage Loan Brokers$9,392,155
TPT EXEMPTIONFINANCIAL SERVICESFinancial Transaction Processing and Clearing$62,544,339
TPT EXEMPTIONFINANCIAL SERVICESOther Activities Related to Credit Intermediation$13,514,042
TPT EXEMPTIONFINANCIAL SERVICESSecurities Brokerage$111,563,402
TPT EXEMPTIONFINANCIAL SERVICESPortfolio Management$45,264,359
TPT EXEMPTIONFINANCIAL SERVICESInvestment Advice$33,966,768
TPT EXEMPTIONFINANCIAL SERVICESOther Financial Investment Activities$483,195,896
TPT EXEMPTIONOTHER SERVICESAutomotive Repair and Maintenance$102,321,964
TPT EXEMPTIONOTHER SERVICESElectronic and Precision Repair and Maintenance$13,195,560
TPT EXEMPTIONOTHER SERVICESCommercial, Industrial Machinery Repair and Maintenance$26,825,008
TPT EXEMPTIONOTHER SERVICESPersonal and Household Goods Repair and Maintenance$5,475,760
TPT EXEMPTIONOTHER SERVICESReligious, Grantmaking, Civic, Professional and similar Organizations$110,617,911
TPT EXEMPTIONALL OTHERWholesale trade (503)$4,022,858,923
TPT EXEMPTIONALL OTHERCash discounts (708)$5,484,353
TPT EXEMPTIONALL OTHERTrade-ins (711)$9,023,345
TPT EXEMPTIONALL OTHERServices provided by a retailer (549)$214,546,830
TPT EXEMPTIONALL OTHERBusiness activity on a Reservation for a Enrolled Native American or Tribal entity (570)$12,119,288
TPT EXEMPTIONALL OTHERSale of postage stamps at face value (716)N/A
TPT EXEMPTIONALL OTHERSales to Foreign diplomats (777)N/A
TPT EXEMPTIONALL OTHERSale of warranty or service contracts (542)$19,090,296
TPT EXEMPTIONALL OTHERSale of tangible personal property by a nonprofit organization (725)$708,350
TPT EXEMPTIONALL OTHERSale of an aircraft sold to a carrier, government or nonresident (507)$331,940
TPT EXEMPTIONALL OTHERSale of stocks and bonds (no deduction code)N/A
TPT EXEMPTIONALL OTHERPrescription drugs and medical oxygen (536)$603,979,601
TPT EXEMPTIONALL OTHERProsthetic appliances (559)$14,649,744
TPT EXEMPTIONALL OTHERInsulin, insulin syringe and glucose test strips (533)$64,657
TPT EXEMPTIONALL OTHERPrescription eyeglasses and contact lenses (590)$1,905,212
TPT EXEMPTIONALL OTHERHearing aids (594)$553,262
TPT EXEMPTIONALL OTHERDurable medical equipment (526)$21,100,163
TPT EXEMPTIONALL OTHERSales to nonresidents for use outside Arizona if the property is shipped or delivered outside the state (541)$5,611,739
TPT EXEMPTIONALL OTHERFood for home consumption (506 and 513)$356,404,061
TPT EXEMPTIONALL OTHERTextbooks that are required by any state university or community college (505)$975,597
TPT EXEMPTIONALL OTHERMeals provided to Employee of restaurants (568)$135,437
TPT EXEMPTIONALL OTHERFood used in school lunches (569)$1,725,879
TPT EXEMPTIONALL OTHERSale of Arizona lottery tickets (521)$43,545,000
TPT EXEMPTIONALL OTHERPrecious metal bullion and monetized bullion (567 and 601)$2,940,132
TPT EXEMPTIONALL OTHERSales of vehicle fuel and aviation fuel (515)$161,824,860
TPT EXEMPTIONALL OTHERTangible personal property sold to Personal property leasing business to lease (571)$708,238
TPT EXEMPTIONALL OTHERTangible personal property sold in interstate or foreign commerce (504)$247,270,220
TPT EXEMPTIONALL OTHERTangible personal property sold to a qualifying hospital or a qualifying health care organization or sold to or purchased by qualifying community health centers and health care organizations (545, 546, 572, 574)$41,929,665
TPT EXEMPTIONALL OTHERTangible personal property sold to a nonprofit organization which regularly serves meals to the needy and indigent (544)$2,321,744
TPT EXEMPTIONALL OTHERTangible personal property sold to a nonprofit organization which provides housing for low-income persons over 62 years of age (573)N/A
TPT EXEMPTIONALL OTHERTangible personal property sold to Qualifying Health Sciences Educational Institution (699)N/A
TPT EXEMPTIONALL OTHERMagazines or other periodicals or publications to encourage tourist travel (602)N/A
TPT EXEMPTIONALL OTHERSale of articles to a contractor for incorporation or fabrication under a
contract or for environmental response or remediation (552 and 589)
$7,025,251
TPT EXEMPTIONALL OTHERTangible personal property sold to a Subcontractor for incorporation into
a Prime Contracting project (584)
$484,851
TPT EXEMPTIONALL OTHERExempt motor vehicle sales for certain nonresidents (580)$250,556
TPT EXEMPTIONALL OTHERExempt motor vehicle sales for Native Americans (530)$2,252,511
TPT EXEMPTIONALL OTHERTangible personal property purchased by a nonprofit charitable organization that uses such property for training, etc., for mentally or physically handicapped persons (575)N/A
TPT EXEMPTIONALL OTHERTangible personal property sold by a nonprofit organization associated with a major league baseball team or a national touring professional golf association (762)N/A
TPT EXEMPTIONALL OTHERTangible personal property sold by a nonprofit organization associated with a rodeo featuring primarily farm and ranch animals (763)N/A
TPT EXEMPTIONALL OTHERSales of commodities under futures contracts consigned to a warehouse for resale (583)$449,724
TPT EXEMPTIONALL OTHERSeeds, seedlings, etc., to commercially produce agricultural, horticultural, viticultural or floricultural crops in Arizona (537)$1,852,887
TPT EXEMPTIONALL OTHERMachinery, equipment and certain supplies used to assist the physically or developmentally disabled or those persons with head injuries (525)$1,776,699
TPT EXEMPTIONALL OTHERSales of natural gas or liquefied petroleum gas used to propel a vehicle (509)$8,982,419
TPT EXEMPTIONALL OTHERPaper machine clothing used or consumed in paper manufacturing (586)N/A
TPT EXEMPTIONALL OTHERMachinery, equipment, utility product, materials and other tangible
personal property used to construct a qualified environmental technology
facilityåÊåÊåÊ(607)
N/A
TPT EXEMPTIONALL OTHERSales of coal, petroleum, coke, natural gas, virgin fuel oil and electricity to an environmental technology facility (511)$290,595
TPT EXEMPTIONALL OTHERSales of liquid, solid or gaseous chemicals used in manufacturing, processing, fabricating, mining, refining, metallurgical operations or research or development (510)$9,033,403
TPT EXEMPTIONALL OTHERSales of food or drink consumed on the premises of a jail or prison (514)$706,492
TPT EXEMPTIONALL OTHERMotor vehicles and any tangible personal property or repair that becomes a part of the motor vehicles sold to a licensed motor operator that lease or rent the property (528)$3,171,834
TPT EXEMPTIONALL OTHERLivestock, poultry feed, salts, vitamins for livestock or poultry consumption (520)$4,953,224
TPT EXEMPTIONALL OTHERSale or purchase of implants used as growth promotants and injectable medicine (516)$273,828
TPT EXEMPTIONALL OTHERSales of motor vehicles at auction to nonresidents of Arizona for use outside Arizona (529)$3,242,085
TPT EXEMPTIONALL OTHERPersonal hygiene products which are furnished to and to be consumed by hotel occupants (534 and 566)$214,254
TPT EXEMPTIONALL OTHERSales or purchases of alternative fuel to a used oil fuel burner (587)N/A
TPT EXEMPTIONALL OTHERPrinted, photographic, electronic or digital media materials for use in publicly funded libraries (519)$227,892
TPT EXEMPTIONALL OTHERTangible personal property consisting of food, beverages and condiments sold to or purchase by a commercial airline (512)$637,134
TPT EXEMPTIONALL OTHERSale of new alternative fuel vehicles and conversion equipment (592)N/A
TPT EXEMPTIONALL OTHERSale of spirituous, vinous or malt liquor by a liquor wholesaler (588)N/A
TPT EXEMPTIONALL OTHERTangible personal property by a nonprofit that produces, organizes or promotes cultural or civic related festivals (764)$46,359
TPT EXEMPTIONALL OTHERApplication services designed to assess or test student learning (596)$68,058
TPT EXEMPTIONALL OTHERSale of motor vehicle fuel and use fuel to a Healthy Forest business (598)N/A
TPT EXEMPTIONALL OTHERSale of repair parts in equipment used by a Healthy Forest business (603)$107,548
TPT EXEMPTIONALL OTHERSales or transfer of renewable energy credits (604)$94,830
TPT EXEMPTIONALL OTHERSales of computer data equipment for use in a certified computer data center (565)$110,527
TPT EXEMPTIONALL OTHERSales of orthodontic devices dispensed by a dental professional (582)N/A
TPT EXEMPTIONALL OTHERProperty sold to a Contractor for a MRRA project on an Indian Reservation (712)$132,548
TPT EXEMPTIONALL OTHERMachinery or equipment used directly in manufacturing, processing, fabricating, job printing, refining or metallurgical operations (522)$30,752,467
TPT EXEMPTIONALL OTHERSale of machinery or equipment used in mining and in drilling for or extracting oil or gas from the earth (523 and 579)$16,358,238
TPT EXEMPTIONALL OTHERCertain equipment used in the telecommunications industry (539)$1,421,457
TPT EXEMPTIONALL OTHERMachinery, equipment or transmission lines used directly in producing or transmitting electrical power (524)$6,438,820
TPT EXEMPTIONALL OTHERNeat animals, horses, asses, sheep, swine or goats used or to be used as breeding or production stock (605)$106,339
TPT EXEMPTIONALL OTHERPipes or valves 4‰Û in diameter used to transport oil, natural gas, artificial gas, water or coal slurry (535)$746,022
TPT EXEMPTIONALL OTHERCertain aircraft, navigational and communication instruments (508)$9,045,906
TPT EXEMPTIONALL OTHERMachinery, tools, equipment used in repairing, remodeling or maintaining aircraft, aircraft engines or aircraft component parts (532)$481,446
TPT EXEMPTIONALL OTHERRailroad rolling stock, rails, ties and signal control equipment used to transport persons or property for hire (576)$104,967
TPT EXEMPTIONALL OTHERBuses or other urban mass transit vehicles used to transport persons for hire or pursuant to a governmentally adopted and controlled urban mass transportation program (606)N/A
TPT EXEMPTIONALL OTHERCertain groundwater measuring devices and their installation (581)N/A
TPT EXEMPTIONALL OTHERNew machinery and equipment used for commercial production of agricultural, horticultural, viticultural and floricultural crops (585)$3,476,564
TPT EXEMPTIONALL OTHERMachinery or equipment used in research and development (553)$913,561
TPT EXEMPTIONALL OTHERTangible personal property used by an direct broadcast satellite television or data transmission service or facility (591)N/A
TPT EXEMPTIONALL OTHERClean rooms used for manufacturing, processing, fabrication or research and development (595)$110,527
TPT EXEMPTIONALL OTHERMachinery or equipment for poultry and egg production (577)N/A
TPT EXEMPTIONALL OTHERMachinery and equipment used by agriculture to prevent, monitor, control or reduce pollution (597)N/A
TPT EXEMPTIONALL OTHERMachinery and equipment to prevent pollution for farming and ranching (599)N/A
TPT EXEMPTIONALL OTHERDigital television machinery and equipment purchases for compliance with the Telecommunications Act of 1996 (578)N/A
TPT EXEMPTIONALL OTHERMachinery and equipment sold or rented to a healthy forest certified business (554)$49,362
TPT EXEMPTIONALL OTHERFederal luxury excise tax on heaving trucks and trailers (609)N/A
TPT EXEMPTIONALL OTHERSales made to the U S Government by a manufacturer, modifier, assembler or repairer (547)$31,451,080
TPT EXEMPTIONALL OTHERSales of component parts made to a manufacturer, modifier, assembler or repairer for sale to the U S Government (543)$5,371,050
TPT EXEMPTIONALL OTHERSales of overhead materials used in a contract between the U S Government and a manufacturer, modifier, assembler or repairer (611)$1,101,000
TPT EXEMPTIONALL OTHER50% of retail sales made to U S Government; 100% of Use Tax (548)$4,152,600
TPT EXEMPTIONALL OTHERGross income from motor vehicle manufacturer‰Ûªs cash rebates if assigned to the retailer (501)$21,677,536
TPT EXEMPTIONALL OTHERGross income derived from the waste tire disposal fee (613)N/A
TPT EXEMPTIONALL OTHERSales of solar energy devices (538)$26,026,180
TPT EXEMPTIONALL OTHERSales of wireless telecommunication equipment as an inducement to enter into or continue a contract for telecommunication services or sales commissions received (614)$65,156
TPT EXEMPTIONALL OTHERSales of motor vehicle to a nonresident from a state with a lower tax rate (531)$2,529,091
TPT EXEMPTIONALL OTHERTransportation by vehicles subject to fees paid to MVD (715)$365,954
TPT EXEMPTIONALL OTHERTransportation of persons by air if taxation is prohibited by Federal Law (615)$1,877,324
TPT EXEMPTIONALL OTHERAmbulances or ambulance services (no deduction code)N/A
TPT EXEMPTIONALL OTHERPublic transportation services for dial‰Ûa‰Ûride programs and special needs transportation services (no deduction code)N/A
TPT EXEMPTIONALL OTHERGross proceeds for transporting freight or property by an exclusively Arizona railroad for portions of single shipments involving other railroads (616)$414,421
TPT EXEMPTIONALL OTHERGross proceeds for arranging transportation as a convenience or service to a customer if the business is not engaged in the transportation business (no deduction code)N/A
TPT EXEMPTIONALL OTHERGross proceeds of sales or gross income derived from transporting for hire persons, freight or property by a railroad pursuant to a contract with another railroad (620)$44,386
TPT EXEMPTIONALL OTHERSales taxed under another business code (640)$167,152
TPT EXEMPTIONALL OTHERSales of transportation or amusement activities arranged by another business that is exempt (612)$230,301
TPT EXEMPTIONALL OTHERSales of transportation or amusement activities arranged and taxed by another (702)$158,247
TPT EXEMPTIONALL OTHERGross proceeds of sales or gross income derived from transporting fertilizer by a railroad from a point in Arizona to another point in Arizona (625)N/A
TPT EXEMPTIONALL OTHERSales of electric services to a retail electric customer who is located outside Arizona for Delivery and use outside Arizona (617)N/A
TPT EXEMPTIONALL OTHERRental of space on utility poles (759)N/A
TPT EXEMPTIONALL OTHERSales from transfer of electricity by a retail electric customer to an electric distribution system (618)N/A
TPT EXEMPTIONALL OTHERDevelopment fees charged by a municipally owned utility (621)$956,377
TPT EXEMPTIONALL OTHERRevenue received by any person owning a utility system in the form of reimbursement or compensation for property and equipment installed to provide utility access to, on or across land of any actual utility consumer (626)N/A
TPT EXEMPTIONALL OTHERInterstate sales of electricity, natural gas and waterN/A
TPT EXEMPTIONALL OTHERInterstate telecommunications services (643)$1,693,959
TPT EXEMPTIONALL OTHERSales of intrastate telecommunications services by a cable television system or by a microwave television transmission system (no deduction code)N/A
TPT EXEMPTIONALL OTHERSales of internet access services (517)$1,253,745
TPT EXEMPTIONALL OTHERSales of intrastate telecommunications services to a direct broadcast satellite television or data transmission service (619)N/A
TPT EXEMPTIONALL OTHEREnd‰Ûuser common line charges and carrier access charges established by federal communications regulations (641 and 627)N/A
TPT EXEMPTIONALL OTHERSales of direct broadcast satellite television services (633)$65,306
TPT EXEMPTIONALL OTHERTelecommunications services purchased with a prepaid calling card (649)N/A
TPT EXEMPTIONALL OTHERManufacturing or publishing books (no deduction code)N/A
TPT EXEMPTIONALL OTHERGross income of publications derived from advertising (628)Included in services
TPT EXEMPTIONALL OTHERSales to a person distributing printing, engraving, embossing or copying without consideration in connection with the publication of a newspaper or magazine (630)N/A
TPT EXEMPTIONALL OTHERSales of job printing, engraving, embossing and copying for use outside Arizona if the materials are shipped or delivered out of the state (637)$679,114
TPT EXEMPTIONALL OTHERSales of postage and freight (561)$1,339,159
TPT EXEMPTIONALL OTHERLeasing a mobile home for more than 29 days (629)$1,382,391
TPT EXEMPTIONALL OTHERLeasing or renting 4 or fewer rooms of an owner‰Ûoccupied residence bed and breakfast with less than 50% average annual occupancy (636)N/A
TPT EXEMPTIONALL OTHERTransient lodging sales or activities that are exempt (704)$1,658,634
TPT EXEMPTIONALL OTHERTransient lodging sales or activities that are exempt under the Amusement or Transporting classifications (701)N/A
TPT EXEMPTIONALL OTHERCommissions paid in the Transient Lodging classification (648)N/A
TPT EXEMPTIONALL OTHERTransient lodging sales for lodging for more than thirty days (718)$606,331
TPT EXEMPTIONALL OTHERLeasing films, tapes or slides used by theaters or movies or used by television stations or radio stations (784)N/A
TPT EXEMPTIONALL OTHERAmusement activities sponsored by the Arizona exposition and state fair board (785)N/A
TPT EXEMPTIONALL OTHERLease of tangible personal property by a parent to a subsidiary or by a subsidiary to another subsidiary (631)$685,999
TPT EXEMPTIONALL OTHEROperating coin‰Ûoperated washing, drying and dry cleaning machines or car washing machines (786)N/A
TPT EXEMPTIONALL OTHERLeasing or renting aircraft or training equipment by a nonprofit school offering aviation and aerospace degrees (787)N/A
TPT EXEMPTIONALL OTHERLeasing or renting photographs, transparencies, etc. used by Arizona on the internet, in magazines or other publications encouraging tourism (651)N/A
TPT EXEMPTIONALL OTHERLeasing or renting certified ignition interlock devices (no deduction code)N/A
TPT EXEMPTIONALL OTHERVehicle registration fee reimbursements (656)$53,622
TPT EXEMPTIONALL OTHERLeasing or renting a motor vehicle if the motor carrier fee has been paid (660)$1,998,224
TPT EXEMPTIONALL OTHERAmounts received by a motor vehicle dealer for the 1stmonth of a lease payment if the lease is transferred to a third party (556)$185,948
TPT EXEMPTIONALL OTHERCar rental surcharge charges (680)N/A
TPT EXEMPTIONALL OTHERFreight charges relating to nonmetalliferous mineral products (652)N/A
TPT EXEMPTIONALL OTHERProcess cost on nonmetalliferous mineral products shipped out of state (658)$775,320
TPT EXEMPTIONALL OTHERPrivate or group instructional activities (657)$434,674
TPT EXEMPTIONALL OTHERMonthly membership fees (527)$2,095,566
TPT EXEMPTIONALL OTHERMusical, dramatic or dance groups or a botanical garden, museum or zoo that qualifies as a nonprofit charitable organization (no deduction code)N/A
TPT EXEMPTIONALL OTHERSales of admissions to intercollegiate football contests (no deduction code)N/A
TPT EXEMPTIONALL OTHERFees and assessments received by a homeowners organization (no deduction code)N/A
TPT EXEMPTIONALL OTHERArranging an amusement activity as a service to a person‰Ûªs customers (no deduction code)N/A
TPT EXEMPTIONALL OTHERPari‰Ûmutuel and purse monies (661)$669,547
TPT EXEMPTIONALL OTHERTransient Lodging recreational establishment membership fees (666)$300,677
TPT EXEMPTIONALL OTHERSale to transient lodging business for resale (670)$62,360
TPT EXEMPTIONALL OTHERGratuities distributed to servers or service employees (724)N/A
TPT EXEMPTIONALL OTHERSales by Congressionally‰Ûchartered veterans organization of food or drink (744)$95,055
TPT EXEMPTIONALL OTHERSales by churches, fraternal benefit societies and other nonprofit organizations which don‰Ûªt regularly engage or continue in the restaurant business for the purpose of fund raising (no deduction code)N/A
TPT EXEMPTIONALL OTHERRestaurant sales to a school district (662)N/A
TPT EXEMPTIONALL OTHERPrime Contracting income from out of state projects (681)$9,873,858
TPT EXEMPTIONALL OTHERSale of used manufactured buildings (562)$238,426
TPT EXEMPTIONALL OTHERSale for resale to another manufactured building dealer (668)N/A
TPT EXEMPTIONALL OTHER35% Deduction from Prime Contracting Base (502)$135,996,969
TPT EXEMPTIONALL OTHERPurchase by a Prime Contractor of machinery, equipment or other tangible personal property by a that is exempt under another classification (608, 622, 623, 624, 632, 635, 639, 644, 645, 646, 654, 665, 674, 675, 685, 691, 697, 706, 799)$4,475,246
TPT EXEMPTIONALL OTHERLand Deduction (518)$11,041,406
TPT EXEMPTIONALL OTHERFurniture and Appliances not incorporated into a Manufactured building (663)N/A
TPT EXEMPTIONALL OTHERContracting in a military reuse zone for a manufacturer, assembler or fabricator of aviation or aerospace products (667)N/A
TPT EXEMPTIONALL OTHERGross proceeds of sales from a contract to install, assemble, repair or maintain machinery that does not become permanently attached (600)$3,314,631
TPT EXEMPTIONALL OTHERIncome from contracts for construction of facilities for raising egg producing poultry or the production and packaging of eggs (683)$528,518
TPT EXEMPTIONALL OTHERIncome from contracts for construction of a launch site (698)N/A
TPT EXEMPTIONALL OTHERIncome from contracts for construction of a domestic violence shelter (673)N/A
TPT EXEMPTIONALL OTHERGross proceeds from contracts to perform post‰Ûconstruction treatment of real property for termite and general pest control (686)$451,048
TPT EXEMPTIONALL OTHERGross proceeds from contracts to certain state university research infrastructure projects (696)N/A
TPT EXEMPTIONALL OTHERGross proceeds from construction contracts for healthy forest business (555)$472,766
TPT EXEMPTIONALL OTHERGross proceeds from development or impact fees (560)$527,681
TPT EXEMPTIONALL OTHERGross proceeds from construction of a mixed waste processing facility located on a municipal solid waste landfill (719)N/A
TPT EXEMPTIONALL OTHERSubcontracting income (550)$295,367,011
TPT EXEMPTIONALL OTHERLawn maintenance services (689)$967,894
TPT EXEMPTIONALL OTHERCost of architectural or engineering service (557)$2,738,282
TPT EXEMPTIONALL OTHERManufactured building delivered out of state (694)N/A
TPT EXEMPTIONALL OTHERConstruction Design phase or professional services (690)$992,689
TPT EXEMPTIONALL OTHERMaintenance, repair, replace or alteration contract with a property owner (500)$118,489,839
TPT EXEMPTIONALL OTHERCredit for tax paid to an equivalent jurisdiction (684)$672,201
TPT EXEMPTIONALL OTHERComponent parts for a manufactured product for resale (687)$3,112,452
TPT EXEMPTIONALL OTHERTangible personal property not exceeding $200 purchased by an individual at retail outside the continental U.S. ‰ÛÒ USE TAX ONLY (693)N/A
TPT EXEMPTIONALL OTHERAdvertising Supplements (688)N/A
TPT EXEMPTIONALL OTHERTangible personal property purchased by a nonprofit charitable organization from the parent or affiliate organization located out of state ‰ÛÒ USE TAX ONLY (695)$72,864
TPT EXEMPTIONALL OTHERMotor vehicles removed from inventory and provided to charitable or educational institutions or state universities or their affiliated organization ‰ÛÒ USE TAX ONLY (703)$190,726
TPT EXEMPTIONALL OTHERTangible personal property which directly enters into or becomes an ingredient or part of cards used as prescription plan identification cards ‰ÛÒ USE TAX ONLY (705)N/A
TPT EXEMPTIONALL OTHERLiquefied natural gas used to fuel compressor equipment ‰ÛÒ USE TAX ONLY (563)$57,082
TPT EXEMPTIONALL OTHERTangible personal property exempt under the Utility classification (707)$855,664
TPT EXEMPTIONALL OTHERPurchase price of electricity bought by a retail electric customer from a utility when tax is paid under utility classification (709)N/A
TPT EXEMPTIONALL OTHERPurchase price of electricity or natural gas by a manufacturer or smelting operations (710)$2,656,924
TPT EXEMPTIONALL OTHERPurchase price of electricity or natural gas by a business that operates an international operations center that is certified by the Arizona Commerce Authority (783)N/A
TPT EXEMPTIONALL OTHERSales to Direct Pay permit holder (692)$144,563
TPT EXEMPTIONALL OTHER3% of tax collected for 911 tax on prepaid wireless products (564)$254,264

Farley contrasted the value of those cuts with what he estimated is a roughly $100 million price tag for restoring Arizona’s cash assistance program for needy families to a two-year lifetime cap, instead of the reduced one-year cap passed in 2016. Reducing the amount of time allowed for anyone receiving the assistance was intended to save $3.8 million, but actually cost the state about $9 million because of federal matching requirements that were no longer met.

“If we weren’t giving away so much in tax exemptions, we could have a lower sales tax rate and have more revenues go to things we want to pay for,” Farley told the House Ways and Means Committee in March. “Or, in some cases, I’ve heard from friends of mine on the other side of the aisle saying we would have enough money to lower the state income tax or get rid of it entirely, if we took away enough of these exemptions.”

Rep. Vince Leach, R-Tucson, opposed SB 1144 and took particular issue with referring to the review committee established by the bill as a the Joint Legislative Tax Expenditure Review Committee, because the name would include the word “expenditure.” Leach said during the committee hearing that name would give the impression that the Legislature is making an appropriation toward each different carve-out, rather than never collecting it.

“I have concerns about telling people that we are spending $12.1B (from TPT) on that,” Leach said.

Arizona law defines tax expenditures as “any tax provision in state law which exempts, in whole or in part, any persons, income, goods, services or property from the impact of established taxes,” including things like exclusions, exemptions, credits and deductions. The Department of Revenue is required to write a report for the governor and Legislature each year detailing “the approximate costs in lost revenue” from all tax expenditures.

House Ways and Means Committee Chairwoman Michelle Ugenti-Rita, R-Scottsdale, said she has repeatedly been surprised to see new tax carve-outs being scheduled for consideration.

“Every time I’m in my agenda setting meetings, I’m shocked to find out about another break or some kind of carve-out (being proposed),” she said during the March 15 committee hearing on SB 1144. “It’s very difficult to make a decision when you don’t understand, or you don’t have the bigger, broader picture and the scope. You need that context so that, when you are considering something, you can fit it into a larger picture. I like the bill.”

The bill was approved by House Ways and Means, but is awaiting a constitutional check by the House Rules Committee before it can be considered by the full House. With the legislative session likely to end in the next week, the fate of SB 1144 is unclear.

After learning about SB 1144, Rep. Paul Boyer, R-Glendale, said he researched examples of states moving to recover carve-outs, and found an instructive example in Florida from the 1980s.

In 1987, Florida lawmakers adjusted how the state determined whether certain services were taxable – in particular, regarding in-state and out-of-state transactions – and the state expected it to produce $1.2 billion in revenue from the change. But after the bill was passed and signed, the business community protested and public opinion polls showed a shift toward opposing the tax, and the plan was repealed after six months.